The Pacific Alliance in the Era of Mega-regional Agreements

With the signature of the Transpacific Partnership Agreement (TPP) in early February, a recent trend seems to have emerged on the expanding number of mega-regional agreements. The Transatlantic Trade and Investment Partnership (TTIP) between the United States and the EU; the Trade in Services Agreement (TiSA) between 23 WTO members including the EU, focused on services and services related disciplines; and the Regional Comprehensive Economic Partnership (RCEP), the Asia-driven quota that includes the 10 ASEAN members and six countries including China, India and Japan. All these agreements are expected to be concluded by the end of 2016.

If they are meant to be more than preferential agreements, what are the mega-regional agreements ? Recent literature suggests that these agreements are in fact preferential trade agreements between countries or regions with a major share of global trade and FDI, with two or more parties that have either a driver position or act as hubs in global value chains. If this is the case and the PA is not another mega-regional agreement not only by definition but also attending to its particular goals of deep integration,  free movement of factors, towards social inclusion and reduction of socio-economic inequality then: What is the relation between the PA and these mega-regional agreements? How would they impact the PA developments? This seems an interesting issue to look at.

Some basic common wisdom indicates that mega-regionals will produce  economic discrimination in relation to the third-countries that are not parties. Further economic research on TPP suggests  that even though there would be some economic negative impact for third countries the results would not be as big as originally anticipated and would change from one country to the other. (if you are interested in numbers and economic predictions of the impacts by TTIP, TPP and RCEP you can check: ged-project.de). For example, individual country results estimate that while Chile and Mexico, actual TPP members, will not have significant economic impact in their economies, Peru could benefit more from it than the others with an estimated income growth of 2.4 per cent. Colombia, the only PA member that is not a TPP member is estimated to get a slight positive impact from it.

Nothing has been said about the impact of neither TPP nor other mega-regional within the PA as a whole. I have a practical effect in mind: human resources in an intergovernmental model such as PA have to devote attention not only to it but also to negotiating and implementing the other agreements to which they are parties or would like to become parties . Moreover, rules of governance in trade created in these mega-regional fora have also made their way into the formal PA rules. Thus, mega-regionals could disseminate their rules within and through PA.

But, are mega-regionals all about trade and economics? if economic effects are not as high as expected in agreements such as TPP, what other added value is in it? Again the answer seems to be different for each player, but for the US case geo-strategic and geo-political considerations are also at the core of negotiating and ratifying this deal.

I look forward to hearing your views on this topic.

Interesting references: ‘Mega-regional Trade Agreements Game-Changers or Costly Distractions for the World Trading System?’ (Report, World Economic Forum, July 2014); The Potential Effect of Mega-Trade Deal on Latin America, Bertelsmann Stiftung, January 2016.